Budgeting your money forces you to think about how and where you spend money. If you are broke by the end of each week, you are either living beyond your means or nickel-and-diming your financial life away. By creating a budget, you will know how much money you have, how much money you need to survive each month, and where your money is really being spent. Budgeting your money requires three simple steps, and there’s no time like now to begin. You may even surprise yourself and find that instead of being without a buck fifty for a soda, you’re able to start saving money. Take the necessary first steps to begin the process of budgeting your money.

Why budget?Your money controls you when you’re unsure of where it has gone and you cannot make ends meet. Lack of control over your money is the first and most important reason to budget. Your money controls you when you see a DVD that you have been wanting and decide to purchase it because you have the cash in your pocket, the debit card handy or worse yet - an available balance on the credit card. If you knew that a DVD was not in the budget and you could not afford it, you would leave it on the shelf.

A budget can prevent the collection agency from calling and help keep you out of debt. A budget can also help dig you out of a financial hole when you find yourself in debt. Budgeting your money becomes a necessity if you find yourself in debt.

Alleviate stress by knowing you have enough money to pay your bills, save a little and have cash in your pocket for life’s little extras. By creating a savings you also provide a cushion for unexpected expenses.

Before you get started budgeting your money, you’re going to need a ledger and a calculator if you don’t have a computer with Microsoft Money or Quicken. You can also create a budget on a spreadsheet program like Excel. It will just take a little more time than one of the money managing programs. Don’t get carried away and become obsessed with your money manager, but don’t bury your head in the sand either. Look your money situation square in the face and refuse to continue on the worn path of stress and lacking funds. The time has come to step up to the plate and face your financial situation.

Step One: What’s Coming In

Begin budgeting by sitting down with your pay stubs and figuring out how much money you make in one month. Don’t include money earned from unexpected places or income that is not consistent. Consider the bonus you received at work or the money you earned selling socks on eBay the hot fudge sauce on your vanilla ice cream. At the top of your ledger or money program write down your monthly income.

Step Two: What’s Going Out

Step two is a big part of budgeting your money and will take some thought and time. Knowing how much money is needed to pay bills tells helps you determine if you’re making enough money to just get by or if you should have a nice savings account established.

List every cent you spend for one month and make sure you include non-essentials as part of the list. Everyone needs to indulge themselves and their family once in a while with special treats, such as a movie, dinner out, or a trip to the zoo. Use the suggestions listed below to help you get started and then add topics that may be unique to your life and circumstances.

When you are tallying household expenses, you can first start with the biggest areas, like mortgage or rent, and work your way down through utilities, home owner’s dues or renter’s insurance and property taxes. You will then want to add in other expenses like groceries, cleaning supplies, laundry or dry cleaning costs and any kind of household supplies like linens and kitchenware. Try to get as many expenses as you can on your list, because when it comes to budgeting your money, this will all factor in.

Another possible topic to consider is transportation. In this category you may want to consider such categories as car payment or lease, insurance, monthly gas expenditures, maintenance and repairs, rental cars, air travel and public transportation. Depending on where you live, you may take the train or subway. In any event, always save receipts for the forms of transportation you utilize to get to and fro.

Communications is another area that adds up. It can include not only phone lines, like a land line and a cell phone, but also calling cards, email connections, faxes and other methods of communication you use.

Personal expenses include anything that you use for yourself. Remember areas like hair cuts and trips to the beauty salon as well as make-up and toiletries. Health costs can include insurance like medical, dental and vision as well as medication or medical supplies. Vitamins and items in your medical supplies cabinet count, and of course, don’t forget clothes, shoes and accessories!

For entertainment, remember to include expenses like cable or satellite television, the Internet, dining out and going for drinks, movies, plays and concerts, and any kind of sporting events. If you bring a gift or a bottle of wine to a party, remember to count those expenses too. Do you take night classes or belong to clubs and organizations? Remember to include membership fees as well as any reading materials like magazines and books. Hobbies can also be included as entertainment.

Though this article tries to cover as many expenses as possible, here is a miscellaneous list you can consult for all the extras that still manage to add up when budgeting your money:

Credit card payments

Loan payments

Child care

Essentials for babies

Children’s lunch money

Allowances for children

Investments

Vacations

Fast food

Money for the vending machine at work

Home improvement projects

Gifts – birthday, Christmas and anniversaries

Emergencies

Try to think of every possible expense you may incur and then think again. Once you have your list it’s time to assign a monetary amount to each item. If it’s a quarterly expense, like taxes, divide the total yearly amount by 12 to get the monthly cost. You’ll have to guesstimate some of the expenses, but do your best to come up with an accurate estimate. Do not purposely write down a low amount to keep your monthly expenses lower. You want a clear understanding of how much you need to live comfortably and have money left over at the end of the month.

Step Three What’s Happening to Your Money

Step three to budgeting your money requires attention to detail in order to succeed. You will need a small notebook to carry with you so that you don’t forget. You’re going to write down every cent you spend throughout the month. Jot down each time you eat fast food, buy a soda or candy bar from the vending machine or any impulsive purchases you make. At the end of the month, add it all up. Are you shocked? You may not realize how much you spend without thinking about it. This is where you can trim the fat from your budget. Go back and cut out categories like the vending machine or eating fast food for lunch and items on the list that you can do without. It’s unrealistic to think that you’ll never eat fast food again, but cutting your fast food spending in half will make a difference.

Here is an example of just how much money you can save per year by cutting out something that seems insignificant: A double-decker sandwich at a fast food chain costs $3.29. If you eat one sandwich every day of the work week you’re spending $16.45 every week which means that your sandwiches are costing you $65.80 per month. If you stop going out for lunch, you could save $789.60 per year. Adding up the money spent on frivolous purchases puts your spending habits into perspective. By following this advice, you will get a good idea of where you need to cut back if you’re not meeting your monthly budget or how you can begin saving money.

These three steps to budgeting your money provide you with a good method for determining where your money is going and what your money is being spent on. However, going through the initial steps without keeping it up and staying focused will keep you from moving forward financially. Make it a habit to write down everything you spend money on. You may want to organize your ledger or money program by dating when a bill is due and noting when the bill was paid. Keep track of your spending whether it’s groceries, gas, or the little extras.

By being completely honest with yourself about your budget you’ll find that you’re ahead of the money game at the end of each month.

It’s as simple as keeping your spending within the parameters of your income. No one ever said that budgeting would be easy or fun, but it’s a lot better than stressing over bills and coming up short. Who knows? You may even find that by following a budget you can save for a big ticket purchase or build up your savings account. Take the first step toward financial solid ground by budgeting your money.

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